In 1984 we argued that the British labour movement subscribed to a myth which is also peddled by most groups on the left of the Labour Party. 'It is the argument that the decline of Britain's industrial production shows that Britain is a declining imperialist power or not even an imperialist power at all'[1]

In our manifesto we showed how the fall in the rate of profit on industrial capital in the decade of the 1970s and early 1980s had led to a rapid rise in the export of capital and to an enormously strengthened role for banking and commercial capital. British imperialism, we argued, 'second only to the United States, [was] through its banking system, the imperialist power gaining a commanding position in this process.'

The myth that Britain's industrial decline in the twentieth century is synonymous with Britain's decline as a world imperialist power has been strongly challenged in an important two volume work on British imperialism by P J Cain and A G Hopkins [2] In this work, covering 300 years of British economic history, the financial and commercial imperialism of the City of London is seen as the central driving force in Britain's rise to dominant world economic power and the crucial factor in long delaying Britain's decline in the face of the challenge from other much stronger industrial capitalist powers. 'The familiar story of Britain's decline as a world power merits reassessment in the light of evidence of her continuing imperialist aspirations and her underestimated successes' (Vol.1 p473).

They give historical examples:

'Despite the declining competitiveness of her manufactures, Britain's ability to impose her will within and beyond the empire was still unmatched in 1914 because the London capital market remained the largest, most efficient and hence most competitive in the world -- as Germany and France were well aware' (ibid).

And again in the 1930s, Britain was far less affected by the world slump than other imperialist rivals, including the United States. A 'resurgence of her imperialist ambitions' based on the Sterling Area, 'the most important international economic bloc', made Britain the 'only truly world power of consequence' challenging the position the US had begun to occupy in Canada, South America and China (Vol.2 p6).

It was the need to fight two world wars to defend its imperialist interests and the British empire from the challenge of German and, in the second world war, Japanese imperialism, rather than Britain's lack of industrial competitiveness, which drastically weakened the British economy. And only during the second world war did the mantle of dominant world imperialist power pass conclusively and irrevocably to the strongest industrial power, the United States.

During the first imperialist war some British investments were permanently lost as a result of the Russian Revolution, others were liquidated, especially those in the United States, to pay for the war. In addition, the British government was saddled with a dollar debt of about £750m. Most United States business was permanently lost to the London markets after the war and the City faced competition from New York and later Paris (Vol.2 p40-42). The second imperialist war forced Britain to make the inevitable choice of economic dependence on the United States rather than military conquest by Germany, once the policy of appeasement had failed -- a policy, as Cain and Hopkins show, backed by influential sections of the ruling class, in particular City and financial interests, in an attempt to avoid economic disruption internationally (Vol.2 p94ff). Britain's survival in the war depended crucially on its ability to borrow from the United States. British assets had to be sold abroad, often at ruinous prices before United States aid was given (Vol.2 p270). At the end of the war Britain was almost bankrupt and totally dependent for its recovery on further aid from the United States.

Nevertheless, even as international financial hegemony passed to the United States, Britain's ruling elite was determined to re-establish sterling as a strong international currency, revitalise the empire, and make full use of the empire's massive sterling balances held in London for post-war recovery. By 1945, as a result of Britain's debts with Sterling Area countries, these balances were seven times as large as Britain's gold and dollar reserves.

The United States after the war was determined to drive home its dominant position by forcing Britain to abandon its discriminatory trading bloc based on the empire (imperial preference system) and insisting on the promise of sterling's rapid return to convertibility in return for a substantial dollar loan. However, the shift in priorities which came with the Cold War softened the United States' approach and British arguments that the British empire was a bulwark against communism were accepted. The empire played a crucial part in Britain's post-war reconstruction, in restoring the pound as an international currency and in providing Britain with desperately needed dollars to pay for its imports (Vol.2 p105, p234, p270). At the close of the 1940s 'sterling remained a formidable force in world trade, accounting for about half of international transactions' (Vol.2 p280).

War and Imperialism

Cain and Hopkins' argue that the approach to imperialist war argued by the classical Marxist tradition at the turn of the century deserves more attention than it has received over the last 30 years. Part 4 in Volume 1 is entitled 'Redividing the World'. And they appear to agree with the Marxist argument that world power relations had to change drastically in 1914 to bring them in line with changes in the world economy brought about by the uneven development of capitalism (Vol.2 p453-4).

With Germany's rise as an industrial power, economic rivalry was fundamental to the dispute between Britain and Germany leading up to the first imperialist war and was global in scope. Germany's decision to build a large navy made an alliance between them impossible without Germany accepting permanent naval inferiority. Conflict was inevitable and 'however hesitant Britain was to enter the war it offered the opportunity to destroy Germany's burgeoning overseas power, at least temporarily, and to preserve Britain's economic dominance overseas -- a dominance without which she was of little account in the world' (Vol.1 p456-465). The second imperialist war 'was the culmination of international rivalries' which were accelerated by the world slump. The failure to accommodate the 'have not' powers of Germany and Japan made war inevitable (Vol.2 p7). Cain and Hopkins remind us of a truth many, including those on the left, have conveniently forgotten. In the case of Britain:

'It is now well known that World War II was fought to defend the empire as well as to defeat fascism, that the battle over the shape of post-war colonial policy was continued as the bombs fell on London...' (Vol.2 p234).

Confronted with this broad analysis we find somewhat disingenuous the comment of the authors: 'The analysis presented in this chapter does not imply that Marxist theories of imperialism are unassailable' (Vol.1 p455, n18).

In this context the Leninist approach receives most criticism for 'limiting imperialism to the finance-capitalist stage of development'; ignoring the importance of the export of capital before the turn of the century; for suggesting 'imperialism was the last stage of capitalism and that the imperialist powers had lost their economic dynamism' and for claiming that 'the economic differences between Britain and Germany made war inevitable.'

These are important issues and cannot be adequately dealt with in the course of this review. But a number of points do need to be made on the differences between Lenin's method and the authors' method, as well as on their overall concept of imperialism.

What is Imperialism?

Lenin's analysis of imperialism is a political attack on an opportunist trend in the working class movement represented by, among others, the ex-Marxist Karl Kautsky. The argument for ultra-imperialism and a peaceful division of the globe is not merely 'far-fetched' as Cain and Hopkins suggest but, in the hands of the Kautskys, was an argument undermining the revolutionary trend in the working class movement, betraying socialism and giving free scope to social-democratic forces to win the working class away from internationalism to the defence of their own imperialist nation. Lenin not only sought to show the real nature of imperialism at the turn of the century but he also explained how the opportunist trends were inevitably produced with the development of imperialism and why a split occurred in the working class movement.

Lenin was fully aware that 'colonial policy and imperialism existed before the latest stage of capitalism, and even before capitalism'. And that 'even the capitalist colonial policy of previous stages of capitalism is essentially different from the colonial policy of finance capital.'[3] He also noted that two important features of imperialism were already observed in Great Britain in the middle of the nineteenth century -- vast colonial possessions and a monopolist position in the world market. Further these developments split the British working class, strengthened opportunism among them and caused the temporary decay of the working class movement. This crucial development resulting from the unique character of British economic history is not even discussed by Cain and Hopkins.

Cain and Hopkins are writing 'economic history'. Their 'principal aim is to understand the causes of British imperialism, not to pass judgment on them' (Vol.1 p47). They have a concept of imperialism which is universal. 'The distinguishing feature of imperialism is not that it takes a specific economic, cultural or political form, but that it involves an incursion, or an attempted incursion, into the sovereignty of another state' (op cit p42-3). This inevitably restricts their ability to understand the economic laws or the class dynamics of either capitalism or imperialism.

Central to Cain and Hopkins' view of British imperialism is their concept of a 'gentlemanly class'. In the early part of the nineteenth century, with aristocratic power in decline, power and prestigedevolved on a new 'gentlemanly class' arising from the non-industrial service sector of British capitalism. At its centre was the City of London already 'incorporated into the inner circles of political power' and by the mid-Victorian period, as a result of free trade and overseas investment, being propelled towards leadership of the global economy rather than a colonial one. The landed aristocracy could mitigate their decline only by reaching an accommodation with this new 'gentlemanly class'. The public schools and an Oxbridge education gave ideological cohesion to this new ruling elite. The most senior British officials, at home or abroad, were drawn largely from its ranks. These elites invested to sustain their 'gentlemanly life-style', distanced themselves from the productive activities of manufacturing and industry and became the financiers of British and overseas government. However they were not idle, say Cain and Hopkins, but 'operated in a world where leisure was often difficult to distinguish from work' (Vol.1 p53 - 134).

What all this talk of 'gentlemanly life-styles' and a 'gentlemanly class' hides is the reality of British imperialism, its colonial possessions and and its dominance of the world economy. And how this British ruling elite sustained itself on the brutal and ruthless exploitation of oppressed peoples, which was the source of their rentier incomes and the material basis of their power and status. But then that would be passing judgment on them!

There are excellent chapters on British overseas expansion and imperialism in India, Africa, the Ottoman Empire and Persia, China, and North and South America. But we never get a real explanation of the driving force behind imperialist expansion. The subjective explanation of maintaining the property income and privilege at home of the British ruling elite in a time of social upheaval and revolution (Vol.1 p45) lacks conviction. At times it would appear that the need to invest 'surplus capital' abroad was due to lack of investment outlets, low rates of return and dynamic industrial demand at home (Vol.1 p187-8). Elsewhere this position is rejected (Vol.1 p382). The distinction between productive and unproductive labour is avoided because it fails to acknowledge the capitalist qualities of the service sector activities of their 'gentlemanly class' (Vol. 1 p37). All this confusion arises from Cain and Hopkins failure to understand the dynamics of wealth creation and profitable production under capitalism.

Now we can see the significance of Lenin's argument that imperialism is the last stage of capitalism. The export of capital, the creation of large financial corporations and capitalist monopolies and the emergence of rentier states, and growing predominance of financiers and bankers, was the consequence of the increasing problems of finding profitable outlets for 'surplus capital' in all the dominant capitalist countries at the turn of the twentieth century. It was this that Lenin called imperialism, a product of capitalism at that particular time. The world had already been partitioned, there were no new outlets for profitable investment etc, so it now had to be repartitioned according to the economic power of the major capitalist states. And how else could the matter be decided except by military conflict? But the outcome was not what Lenin or anyone else had expected. Although capitalism was overthrown in Russia, opportunism and chauvinism in all the major working class movements -- something which Lenin could explain -- prevented revolution in all the developed capitalist/imperialist countries. After a second world war, there was an outcome which, although very different, was similar in impact to what Kautsky thought possible under his 'far-fetched' ultra-imperialism. One country, the United States of America, totally dominated the world economy. It was this outcome, which Lenin could not have predicted, which allowed the 'peaceful' rapid expansion of capitalism of the major imperialist countries. The wars and revolutions, the poverty and oppression were confined, for the time being, to the rest of the world.

But the laws of capitalism did not change. The massive export of capital, the growth of financial and transnational corporations with global aspirations continued, and as Japan and Germany rebuilt their economies to become powerful competitors of the United States, inter-imperialist rivalries have reappeared in similar form to those Lenin outlined at the turn of the century. In this respect imperialism is the last stage of capitalism.

The failure of Cain and Hopkins to understand the dynamics of capitalist production and imperialism is responsible for the very weak section of the book dealing with the period from the end of the post-war boom. That is probably why they have underestimated the continuing relative strength of British imperialism today in the form of its powerful international companies, financial corporations and the City of London. It also explains their failure to examine the rapid rise in the export of capital that began in the mid-1970s and was the starting point of this review.

The composition of the British ruling elite might have changed but its determination to reinforce and defend the interests of British imperialism in the face of Britain's continuing industrial decline is still the powerful driving force behind the British economy.